Helsinki (10.03.2003 - Juhani Artto) How is the Finnish welfare state holding up in 2003? What are its prospects? Will it survive the pressures of globalisation? How can the welfare model be developed?
The details of these major questions are considered daily in a large variety of ways, both publicly and privately. Every citizen has a point of view. Politicians submit their claims and proposals; public authorities have their own positions. Researchers must often play the role of advising their audiences as to how things really are but, as is natural, they are also divided in their conclusions.
In October 2002 two researchers, Anu Kantola and Mikko Kautto, published a book* in which they list the issues that must be addressed and outline the options on various questions. The researchers draw no concrete conclusions, leaving this to those concerned and especially to politicians, whom they recently criticised for their unwillingness to state openly what kind of welfare model they support.
Instead of making clear statements on the essential elements of the welfare state, politicians tend to focus on details and speak about these in a manner that is divorced from the complex entirety.
Much focus on taxation
The book’s material is more relieving than alarming. Finnish people have good prospects of preserving the welfare society fundamentals that a large majority of them support. These fundamentals include a universal right to education, health care and social protection. By international standards the income gap is a narrow one and gender equality is advanced. Political stability based on consensus building between the major stakeholders in society is also an important factor.
The relative openness of the economy means that there is hard external pressure to steadily improve the competitiveness of various industries. In recent years this has been successfully achieved, as several international indices confirm.
Over the last few years the public debate has focused a great deal on taxation and international tax competition. The overall burden of taxation in Finland is one of the highest in the world, and was estimated at 44.7 per cent in 2002. In 1999 the EU average was 41.3 per cent, and the OECD average about 36.8 per cent.
High taxation is, however, the principal method of financing universal education, health care and social protection. The alternative would be to transfer prime responsibility to individuals and families, which would eventually impair the position of lower income groups.
"Finland's welfare model has not always been well received by internationalised enterprises. They have submitted various demands for lower taxation that have so far focused especially on high marginal taxes and the taxation of labour. In extreme cases enterprises may also threaten to relocate their head offices away from Finland, for example," the researchers note.
Every now and then there has been speculation as to how long Nokia Plc, the flagship of Finnish industry, will maintain its head office in Finland. The occasional calls for lower taxation made by Nokia CEO Jorma Ollila have fuelled this speculation into full-scale scaremongering.
Support for the tripartite system
Although regular wages and salaries in industry are close to the European Union average, specialists working in business enterprises are clearly paid less than the EU average. This has not, however, resulted in any worrying brain drain. Not yet, say the critics, who view this gap as unsustainable. Others point out that the number of immigrants has exceeded the emigration flow in recent years.
Various stakeholders in Finland, the trade unions included, keenly follow changes in international economic conditions and seek to adapt to them. The modest pay rises in collective agreements are one expression of this, while tripartite co-operation between the government, employers and unions is another. In the present parliamentary election campaigns all of the major political parties have confirmed their support for continuing the tripartite approach to settling the problems of working life.
The trade union movement views this as an asset and as a good starting point for defending the welfare state. Since the recession of the early 1990s the trade union struggle on the welfare state has been a defensive one. This also remains the outlook for the immediate future. No major reforms of working life or reforms to benefit working people are under consideration. Instead, expenditure cuts in public services have been a typical trend.
These cuts have been of such a depth that some researchers have held that the fundamentals of the Finnish welfare state are no longer intact. The authors of the book, published in October 2002, do not share this conclusion.
*Anu Kantola, Mikko Kautto: Hyvinvoinnin valinnat - Suomen malli 2000-luvulla (Choices in welfare - Finland’s model in the 2000s), Edita 2002